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Rises Expected in Brazilian Cattle Futures

BRAZIL - Futures contracts for fed cattle in Brazil traded at BM&FBovespa indicate increasing values for the next three dates.

This is a move that has been expected for this time of the year, because of the off-season peak.

The December/14 contract closed at 132.59 BRL on 30 September, 2.6 per cent above that registered in the same day in the spot market in SP – the ESALQ/BM&FBovespa Index for fed cattle in SP averaged 129.20 BRL.

According to analysts at the Brazilian Cepea, some players, however, still believe that quotes might reach 135.00 BRL until the end of the year.

Agents surveyed by Cepea said that the number of animals in feedlots might not be significant.

Assocon (Brazilian Cattle Feeders Association) said that the increase of animals in feedlots from 2013 to 2014 might be only four per cent.

The low supply and high prices for calf and lean cattle are bringing difficulties to the purchase of new batches. For the time being, most animals in feedlots are expected to be offered in October, as usual.

On the other hand, Cepea said that one aspect that might limit price increases is the possible concentration of animals leaving feedlots.

Forecasts for a rainier summer in Brazil might also accelerate the delivery of batches from feedlots, because of the difficulties in keeping the animals.

In September, the ESALQ/BM&FBovespa Index for calves between eight and12 months old in Mato Grosso do Sul averaged 1,073.93 BRL, the highest of the entire Cepea series, since it started in 2000, in real terms (IGP-DI August 2014).

Compared to August, the increase was 1.8 per cent, and, against September 2013, there has been a sharp rise of 35.3 per cent, in real terms.

The ESALQ/BM&FBovespa Index (São Paulo State) for fed cattle averaged 128.58 BRL in September, moving up 4.3 per cent (in real terms) compared to August 2014 and 16.5 per cent compared to September 2013.

At the end of Septemebr, the Index closed at 129.2 BRL ($52.74), increasing 0.3 per cent compared to 23 September and 1.1 per cent in the month.

In the pig sector, record hog values along with corn price decreases continue to push up the purchasing power of swine producers.

By the end of September, the exchange rate between hog and corn was at its most favourable to producers, considering the entire Cepea series for the animal.

The limited supply of finished animals and expectations of an increase of pork exports remain major reasons for hog price rises.

In the poultry market, broiler quotes rose in September, because of a good performance in exports and a heated domestic demand.

Among reasons for the higher demand are high prices for competing meats (beef and pork), which lead consumers to turn to chicken.

According to those surveyed in the market by Cepea, some purchasers are also starting to build stocks for the end of the year.